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RBI’s big surplus transfer to Centre due to shrinking balance sheet size by fourth in 2020-21

RBI's big surplus transfer to Centre due to shrinking balance sheet size by fourth in 2020-21

New Delhi, June 4 (SocialNews.XYZ) Last month the Reserve Bank of India (RBI) had surprised many by announcing huge surplus transfer of Rs 99,122 crore to Centre for nine months ended March 31, 2021.

Now it has justified the transfer suggesting that it was made possible due to lower risk capital provisioning by the central bank this year as it balance sheet size shrunk by a fourth.

 

Addressing media persons about the MPC decisions after the statement of RBI Governor Shaktikanta Das, the Central Bank's Deputy Governor T.Rabi Sankar said that the increase in balance sheet size of RBI which swelled to Rs 12.37 lakh crore in 2019-20 shrunk to a quarter at Rs 3.64 lakh crore in 2020-21.

"This allowed lower risk capital provisioning this year allowing for generation of higher surplus," Sankar said.

He added that along with this, transfer from profit to contingent fund has also come down this year generating more surplus.

The higher transfer of surplus is expected to help the government ease fiscal pressure caused by the Covid-19 pandemic and also aid it in giving the economy a boost.

In the past, the demand on the RBI for higher dividends and to part with a greater share of its capital has been a hotly debated issue between the central bank and the government.

Skipping a direct answer, Das said during the post MPC press conference that surplus transfer was not a policy matter for the central bank but purely an accounting issue.

The RBI Central Board last month approved the transfer of Rs 99,122 crore as surplus to the Central Government for the accounting period of nine months ended March 31, 2021 (July 2020-March 2021), while deciding to maintain the Contingency Risk Buffer at 5.50 per cent.

The RBI approved a Rs 1,76,000 crore ($24.8 billion) dividend payment to the government, including Rs 1,48,000 crore for FY20.

RBI earns via interest income on account of open market operations (OMOs), foreign exchange (FX) gains, and writing back of excess risk provisions.

It's liabilities include issuance of notes and deposits held (CRR and reverse repos).

Source: IANS

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RBI's big surplus transfer to Centre due to shrinking balance sheet size by fourth in 2020-21

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